Departmental appropriations

Departmental appropriations are appropriations that the accountable authority of the reporting entity has control over to spend for the ordinary operating costs of the entity. They typically include:

salaries; accruing employee entitlements; operational expenditure, for example, for the purchase of goods and services

Variations in the nature of appropriations or entity circumstances (or both), can result in variations for the recognition of appropriations across different jurisdictions in Australia or for different types of appropriations within a particular jurisdiction.

Over time, there may also be changes to the:

  • nature and content of appropriation legislation
  • way an entity’s activities are funded
  • mechanisms for ensuring public funds are appropriately used, consistent with Australian Government priorities, as sanctioned by the Parliament.

Initial recognition - timing

FRR section 38 – Departmental appropriations

This section sets out the recognition requirements for different types of departmental appropriations.

Under AASB 1058 Income of Not-for-Profit Entities (AASB 1058), the extent to which appropriated amounts are recognised as income of a particular reporting period, is determined by the:

  • characteristics of the appropriation
  • circumstances in which the entity recognises the appropriated amounts.

This varies according to the type of appropriation, as shown in Table 1.

Table 1: Timing for the initial recognition of departmental appropriations

Appropriation Timing
Loans (appropriation Acts) When the amount to be received is drawn from the Official Public Account (OPA)
Advance to the Finance Minister (AFM), or Advance to the responsible Presiding Officer (APO) Determination commencement date
Departmental supplementation Approval date
All other departmental appropriations (appropriation Acts)

The later of the:

  • appropriation Act commencement date
  • commencement date of the financial period the appropriation relates to – that is, when the appropriation is effective.

Initial recognition - categories

FRR section 38 – Departmental appropriations

This section details the categories and accounting treatment on initial recognition.

For departmental appropriations:

  • amounts designated as contributions by owners are recognised as equity – this includes:
  • loan appropriations are recognised as increases in borrowings
  • all other amounts are recognised as revenue.

A transfer, or class of transfers, must be formally designated as forming part of the transferee’s contributed equity either before or at the time of the transfer, in accordance with paragraph 8(c) of AASB Interpretation 1038.

A structured approach for determining the correct accounting treatment for different classifications of appropriations is provided in AASB 1058, including at:

  • paragraph 6 – entities must faithfully represent the economic substance by applying AASB 1058 to each in-scope transaction, including appropriations, based on the substance of the transaction (that is, not its legal form or description)
  • paragraph 9 – on initial recognition of an asset (that is, appropriations receivable), entities are to recognise any related amounts, measured in accordance with the applicable Australian Accounting Standards (paragraph 3 of AASB 1058), including for:
    • contributions by owners
    • contract liabilities
    • financial liabilities
    • lease liabilities
    • other liabilities and revenue
  • paragraph 10 – any income is recognised immediately in the statement of comprehensive income
  • paragraph 12 – income is determined as the difference between the consideration for an asset and the asset’s fair value, after recognising any other related amounts
  • paragraphs 15-17 – the circumstances where an exception applies.

For example, AASB 1058 applies to:

  • appropriations related to an amount that meets the definition of contributions by owners over which an entity has obtained control – these are recognised as a direct adjustment to equity, under section 32 of AASB 1004 Contributions (AASB 1004)

  • departmental annual appropriations where consideration to acquire an asset (appropriations receivable) is significantly less than fair value – these are principally to enable a not-for-profit NCE to further its objectives.

If an NCE is appropriated $5.5M departmental equity injections:

  • Income ($0) = Appropriations receivable ($5.5M) – Consideration ($0) – Related amounts (Contributions by owners $5.5M)

  • Journal entry:

    • Dr Appropriations receivable – CE $5.5M

    • Cr Contributed equity $5.5M

If an NCE is appropriated $22M departmental operating:

  • Income ($22M) = Appropriations receivable ($22M) – Consideration ($0) – Related amounts ($0)

  • Journal entry:

    • Dr Appropriations receivable $22M

    • Cr Appropriation revenue $22M

Certain appropriations, such as departmental operating supplementation, are recognised as receivable from government (as distinct from appropriation receivable) until the amount approved is legally appropriated – at which time receivable from government is reduced and the appropriation receivable is increased.

For more information on identifying when transfers are classified as contributions by owners and the accounting treatment, see RMG-123 Deeming or designating transfers of assets and liabilities as 'contributions by owners' (equity) (RMG-123).

Formal additions and reductions - overview

FRR section 40 – Formal additions and reductions

This section lists the different types of formal additions and reductions to appropriations (including any specific requirements), as well as their impact on an entity’s financial statements.

The timing for formal additions or reductions to be recognised in the statement of comprehensive income (that is, gain or loss of accounting control) may differ to the reporting period in which they are disclosed in the appropriation note (that is, appropriation legally available).

To be a formal addition or reduction, the gain or loss event must be:

  • one of the event categories listed at subsection 40(2) of the FRR 
  • evidenced in writing:
    • on or before 30 June of the relevant financial year, and
    • by the appropriate authority – see the list of appropriate authorities at Table 2.

Publication of a budget measure in Portfolio Budget Statements (PB Statements), or entry in CBMS, by itself is not sufficient authority to support an adjustment to appropriation revenue.

Formal additions or reductions impact on the recognition or disclosure (or both) of an appropriation. If the gain or loss event is evidenced in writing but there is no government-approved legal instrument, NCEs must adopt the following approach for:

evaluation methods

Formal additions must be included in an NCE’s appropriation note as legally available appropriation where the written evidence is a qualifying government-approved legal instrument – which is limited by subsection 40(4) of the FRR to determinations made under section 75 of the PGPA Act and an AFM or APO. See the list of government-approved legal instruments at Table 2.

Table 2: Appropriate authorities and government-approved legal instruments for formal additions or reductions

Formal addition or reduction

Appropriate authority

Government-approved legal instrument?

PGPA Act section 75 transfers

PGPA Act section 75 determination

Yes

Departmental supplementation

Decision of Cabinet or the Prime Minister (such as a Cabinet minute, letter from Prime Minister)

No

Adjustments for workload agreements and no-win,  no-loss funding

Decision of Cabinet or the Prime Minister (such as a Cabinet minute, letter from Prime Minister)

(With written advice from Finance confirming the amount of the adjustment/funding.)

No

AFM (or APO)

AFM (or APO) determination

Yes

PGPA Act section 51 withholdings

PGPA Act section 51 direction (not a legal instrument)

No

All other adjustments (decision of Cabinet or the Prime Minister)

Decision of Cabinet or the Prime Minister (such as a Cabinet minute, letter from Prime Minister)

No

Formal additions and reductions - guidance

The accordions below provide guidance on the following formal additions and reductions:

  1. Current-year appropriation transfers
  2. Departmental supplementation
  3. COVID-19 activities
  4. Departmental appropriation used for urgent administered payments
  5. Departmental advances to the Finance Minister or responsible presiding officer
  6. Agreements and no-win, no-loss
  1. Departmental appropriation withheld
  2. Decision of the Cabinet or Prime Minister
  3. Adjustments to appropriations
  4. Retainable receipts
  5. Recoverable GST
  6. Prior year appropriation transfers

PGPA Act section 75 determinations (or amendment determinations) have three distinct dates. These are the:

  • determination date – the date the determination is signed
  • registration date – the date the determination is registered on the Federal Register of Legislation 
  • commencement date – the date specified in the commencement clause of the determination.

For PGPA Act section 75 transfers, the control of an appropriation is lost or gained at the later of the determination date or the commencement date. In determining the date that control is lost or gained, NCEs must refer to the PGPA Act section 75 determination (or amendment determination) – not the relevant compilation (where applicable).

Subsection 75(8) of the PGPA Act allows the transfer to take effect before, or after, the day the determination is registered – although PGPA Act section 75 transfers generally take effect after the registration date.

For information on the:

Table 3: Current year appropriation transfers – accounting treatment and appropriation note

Entity

Accounting treatment

Appropriation note

Transferring NCE

Reduction in:

  • appropriation revenue*, or
  • contributed equity** and appropriations receivable.

The legally available appropriation
is reduced in the appropriation note.

Receiving NCE

Increase in:

  • appropriation revenue*, or
  • contributed equity** and appropriations receivable.

The legally available appropriation
is increased in the appropriation note.

* Departmental operating in the current year
** Amounts designated as contributions by owners.

An NCE gains control of departmental supplementation on the date of approval – see subsection 38(2)(e) of the FRR.

Adjustments must be supported by a Cabinet minute or letter from the Prime Minister that includes specific wording on both the timing and amount of the adjustment.

NCEs that were required to undertake COVID-19 tasks in the current financial year, but will not receive the appropriation until the next financial year, should accrue the appropriation as revenue from government under strict conditions. The requirement and the delay of the appropriation must have been:

  • documented in writing
  • explicitly approved at the whole-of-government level, either by Cabinet or the Prime Minister (without exception)
  • evidenced by way of an approval document, dated on or before 30 June of the current financial year.

As a result of a government decision, an NCE may be required to commence or continue administered activity for which no administered appropriation has yet been provided. In this situation, the:

  • NCE is expected to use available departmental operating appropriation (from the prior or current year, or both) to meet the expenditure – this will be reported in departmental financial statements
  • funding in excess of actual requirements may:
    • subsequently be replenished through additional departmental funding in the next Appropriation Bill (entities should consider whether the funding meets the criteria for a formal addition)
    • need to be withheld under section 51 of the PGPA Act, until the relevant appropriation lapses (applicable where additional administered appropriation is already included in the next set of Bills before the Parliament).

Depending on the timing of the expenditure and supplementation, this may give rise to a technical operating loss. Where this occurs, NCEs are to:

  • comply with the operating loss framework
  • contact the relevant Finance Agency Advice Unit (AAU) for further advice.

If payments occur in one financial year but additional departmental funding will not be provided until the next financial year, revenue from government can only be accrued where the NCE has a specifically worded Cabinet minute or letter from the Prime Minister that details the timing and amount of departmental funding.

Accounting treatment for supplementation:

Accounting treatment for:

  • supplementation approved – an increase in revenue from government (departmental operating) or contributed equity (amounts designated as contributions by owners) and receivable from government (approval date; not to be recognised as appropriations receivable).
  • Supplementation subsequently appropriated in the same or next financial year – decrease in receivable from government (supplementation amount), increase in appropriation revenue or contributed equity (to the extent not already recognised – for example, total amount of departmental appropriated less the supplementation amount) and appropriations receivable (total amount of departmental appropriated).
  • For CBMS purposes, there is a requirement to recognise the total increase in departmental appropriation revenue (including supplementation) against CBMS account 1280004. This enables NCEs to be appropriated and drawdown funds. See illustrative examples D4.2–D4.4 in Appendix 1, available under Tools and Templates, for further information.

Appropriation note for:

  • supplementation appropriated in the same financial year – funding for supplementation included as legally available appropriation.
  • supplementation appropriated the next financial year – supplementation excluded in year approved, as it is not yet legally available appropriation (then included in year appropriated).

Departmental AFMs and APOs (for parliamentary NCEs) are not common. For AFMs and APOs:

  • NCEs gain control of an amount appropriated by an AFM or an APO on the commencement date of the determination – see subsection 38(2) of the FRR 
  • any unspent amounts at the end of the financial year are withheld under section 51 of the PGPA Act, with the effective date of the PGPA Act section 51 direction being 30 June, until such a time as the relevant appropriation Act automatically lapses.

Determinations allocating AFM or APO amounts are made in accordance with provisions in the Appropriations Acts. See RMG-100 Guide to Appropriations (RMG-100) for further information.

Accounting treatment for an AFM or APO:

Accounting treatment for:

  • commencement date of determination – an increase in appropriation revenue and appropriations receivable.
  • 30 June (year appropriated) – for treatment of any unspent amount, see the Departmental appropriation withheld accordion below.

Appropriation note for 30 June (year appropriated) – AFM and APO amounts included as legally available appropriation (including amounts withheld under section 51 of the PGPA Act).

For more information, see RMG-100.

An NCE gains or loses control of appropriation as a result of any agreement (such as purchasing, workload or other agreements) that provides for:

  • additional funding for over-delivery or a reduction of funding for under-delivery
  • funding arrangements that are specifically designed to not financially advantage or disadvantage an NCE (such as supplementation on the basis of no-win, no-loss arrangements agreed to by Cabinet).

For funding provided on a no-win, no-loss basis – the amount of additional funding to be provided or the amount of surplus funding to be recovered/refunded may be recognised in the current reporting period (that is, the same reporting period as the win or loss, when it can be reliably measured). The amount to be reported should be agreed in writing with Finance.

Under subsection 40(2)(c) of the FRR, such agreements must as a minimum:

  • set out one or more quantifiable deliverable(s) or a specific amount of appropriation relating to each, and
  • be approved by, or arise from, ministerial or Cabinet decisions prior to the funding being given.

Accounting treatment for additional funding provided in a subsequent period:

Accounting treatment for over-delivery under agreement or over-spend for no-win, no-loss:

  • financial year work performed – an increase in revenue from government (departmental operating) or contributed equity (amounts designated as contributions by owners) and receivable from government (noting that for no-win, no-loss the amount depends on the arrangement rather than the over-spend; not to be recognised as appropriations receivable).
  • financial year amount appropriated – decrease in receivable from government (amount previously recognised as per arrangement), increase in appropriation revenue (for departmental operating) or contributed equity, to the extent not already recognised and appropriations receivable (total amount of departmental appropriated).

Appropriation note for over-delivery under agreement or over-spend for no-win, no-loss:

  • financial year work performed – these amounts excluded, as they are not yet legally available appropriation.
  • financial year amount appropriated – these amounts included as legally available appropriation.

See illustrative example D4.3 in Appendix 1, available under Tools and Templates, for further information.

    Accounting treatment for funding excess to requirements:

    Accounting treatment for under-delivery, under agreement or under-spend for no-win, no-loss – funding is excess to requirements in current year, for:

    • amounts withheld, see 7. Departmental appropriation withheld.
    • any amounts that are administratively quarantined, see Quarantines.
    • other amounts, there are no accounting entries, as future appropriations that may be adjusted are not assets. Any unspent amounts are included in the appropriation note as legally available appropriation.
    FRR section 36 - Withholding and quarantining of appropriations

    This section outlines the accounting treatment for amounts withheld under section 51 of the PGPA Act.

    Under section 36 of the FRR, amounts withheld under section 51 of the PGPA Act represent a loss of control event and should be adjusted against the appropriations receivable balance.
    For gain or loss of control events, see subsection 40(2) of the FRR.

    Any adjustments under section 51 of the PGPA Act are not valid until the direction is signed. NCEs cannot adjust appropriations on the basis of a request being submitted to Finance.

    Under section 51 of the PGPA Act, the Finance Minister may withhold an amount of appropriation, for example, where there is:

    • a movement of funds between years resulting in a reappropriation in a later year
    • a reallocation or reclassification resulting in reappropriations
    • a savings decision
    • unspent and unrequired administered appropriations
    • a foreign exchange gain under the ‘no win, no loss’ arrangements, or
    • a ‘net-negative’ appropriation (where the overall reduction in appropriation estimates is greater than the overall increase in appropriation estimates).

    Accounting treatment for departmental appropriation withheld:

    Accounting treatment:

    On the signature date of the PGPA Act section 51 direction, (with the entry being reversed if a new direction subsequently reverses it). Reduction in:

    • appropriation revenue (current year departmental operating)
    • contributed equity as a return of equity (prior year operating), or
    • contributed equity (amounts designated as contributions by owners) and appropriations receivable.

    Appropriation note:

    PGPA Act section 51 withheld amounts included as legally available appropriation, with footnote disclosure (current year) and additional disclosure by appropriation Act (prior year).

    For more information on the withholding process, email Annual.Appropriations@finance.gov.au.

    Adjustments to appropriation that result from a decision of Cabinet or the Prime Minister:

    • constitute a gain or loss of control event
    • must be evidenced in writing by the appropriate authority with a specifically worded Cabinet minute or letter from the Prime Minister.

    To be reflected in the appropriation note, formal adjustments to appropriation require a government-approved legal instrument (in addition to the written evidence) – see subsections 40(3) and 40(4) of the FRR.

    In the absence of a government-approved legal instrument, there is a timing difference between the gain or loss of control of appropriation (for accounting purposes) and the appropriation being legally adjusted (as disclosed in the appropriation note). Refer to Formal additions and reductions - overview for further detail.

    A Cabinet minute or letter from the Prime Minister does not constitute a government-approved legal instrument – see Formal additions and reductions - overview.

    Accounting treatment for a decision of the Cabinet or Prime Minister

    Accounting treatment for:

    • a funding increase – see the 2. Departmental supplementation accordion above.
    • a funding decrease – for amounts that are withheld, see the 7. Departmental appropriation withheld accordion above.
    • quarantines – for amounts that are administratively quarantined, see Quarantines.
    • other amounts – there are no accounting entries because future appropriations that may be adjusted are not assets and any unspent amounts are included in the appropriation note as legally available appropriation.
    FRR section 37 - Adjustments to appropriations

    This section lists items that adjust appropriations receivable but not appropriation revenue.

    Entities should adjust appropriation receivable and not appropriation revenue for:

    Under section 74 of the PGPA Act, retainable receipts:

    • are monies that can be retained by an NCE if part or all of the amount received is consistent with section 74 of the PGPA Act and section 27 of the Public Governance, Performance and Accountability Rule 2014 (PGPA Rule)
    • increase an NCE’s most recent departmental appropriation when the NCE records the amounts in its internal accounts and records – see subsection 74(2) of the PGPA Act.

    For an NCE to retain and spend receipts, the NCE requires both:

    • legislative authority in an Act, rule, instrument or other subordinate law
    • policy authority from Cabinet or the Prime Minister.

    If an NCE retains input tax credits relating to the Good and Services Tax (GST) in reliance on section 74 of the PGPA Act (and subsection 27(2A) of the PGPA Rule), they cannot also credit their appropriation in reliance on section 74A of the PGPA Act. For more information, see subsection 27(8) of the PGPA Rule and 11. Recoverable GST.

    Accounting treatment for retainable receipts:

    Accounting treatment:

    • receipt – an increase in revenue and increase in cash (entity’s bank account).
    • on sweep to OPA – an increase in appropriations receivable and decrease in cash when transferred to the OPA.

    Appropriation note for receipts – included as an increase to legally available appropriation.

    For more information, including a list of receipts that are retainable and those that are not, see RMG-307 Retainable receipts (RMG-307).

    Section 74A of PGPA Act is usually used for administered GST payments. Under section 74 of the PGPA Act, amounts that are administered in nature are generally not retainable (with the exception of repayments) therefore, section 74A provides a mechanism to facilitate GST inclusive payments as well as amounts to be remitted to the Australian Taxation Office (ATO) as net GST collected.

    Section 74A of the PGPA Act:

    • authorises a limited by amount appropriation to be increased by a GST qualifying amount – as defined at subsection 74A(3) of the PGPA Act – to facilitate payments that are inclusive of GST
    • is typically used for GST payments related to administered activities.

    A GST qualifying amount only arises if an NCE is receiving a taxable supply as detailed in Divisions 9 and 19 of the A New Tax System (Goods and Services Tax) Act 1999.

    Under section 27 of the PGPA Rule, two types of GST-related receipts qualify as retainable receipts (and may increase certain appropriations, for the purposes of section 74 of the PGPA Act (see 10. Retainable receipts)) – these are:

    • amounts collected when selling goods and services (in order to pay net GST owed to the ATO)
    • GST refunds from the ATO to the extent that section 74A of the PGPA Act was not used to increase an appropriation to pay the related GST qualifying amount – see subsection 27(8) of the PGPA Rule.

    Accounting treatment for recoverable GST for PGPA Act section 74A used (Administered) – limited by amount of appropriation increased for GST:

    Accounting treatment:

    • invoice – increase in expense (GST exclusive amount), increase in GST receivable (GST) and increase in liability (payables – GST inclusive amount)
    • drawdown of cash – increase in accumulated results (GST inclusive amount) and increase in cash at bank
    • payment of invoice – decrease in cash at bank and decrease in liability (payables)
    • receipt of refund from ATO– decrease in accumulated results (cash to the OPA) and asset (receivable).

    Appropriation note for PGPA Act section 74A used – excluded as note is prepared on a recoverable GST exclusive basis.

    See illustrative example A2 in Appendix 2, available under Tools and Templates, for further information on adjusting administered appropriations.

    Accounting treatment where PGPA Act section 74A not used (Departmental) – input tax credit retained under PGPA Act section 74:

    Accounting treatment:

    • invoice – increase in expense (GST exclusive amount), increase in asset (GST receivable - GST amount) and increase in liability (payables – GST inclusive amount)
    • drawdown of cash – decrease in appropriation receivable (GST inclusive amount) and increase in cash at bank
    • payment of invoice – decrease in cash at bank (GST inclusive amount) and liability (payables).
    • receipt of refund from ATO – increase in cash at bank (GST amount) and decrease in asset (GST receivable)
    • sweep amount to OPA – decrease in cash at bank and increase in appropriation receivable.

    Appropriation note for PGPA Act section 74A not used – PGPA Act section 74 receipts included as increase in legally available appropriation.

    PGPA Act section 75 transfers of appropriations, representing prior years’ unspent appropriations, are accounted for against equity in the same way as other assets that are transferred as part of the restructure of administrative arrangements.

    Transferred assets are treated as contribution by owners when, and only when, they satisfy the definition of contributions by owners in AASB Interpretation 1038.

    Accounting treatment for prior year appropriation transfers:

    Accounting treatment for:

    • Transferring NCE – reduction in contributed equity (departmental operating – prior year or equity – prior year) and appropriations receivable
    • Receiving NCE – increase in contributed equity (departmental operating – prior year or equity – prior year) and appropriations receivable.

    Appropriation note for:

    • Transferring NCE – legally available appropriation is reduced in the appropriation note, with additional disclosure.
    • Receiving NCE – legally available appropriation is increased in the appropriation note, with additional disclosure.

    For more information on:

    • the calculation of the departmental transfer amount see, Appendix 1 of RMG-118
    • identifying when transfers are classified as contributions by owners and the accounting treatment, see RMG-123.

    Quarantines

    FRR section 36 - Withholding and quarantining of appropriations

    This section details the treatment of amounts administratively quarantined by the Department of Finance.

    Funds subject to movement of funds requests are typically quarantined on a temporary basis by AAUs to prevent entities inadvertently drawing down against the relevant appropriation.

    Accounting treatment for quarantines:

    Accounting treatment – no accounting adjustments (that is, no impact on appropriation revenue/contributed equity or appropriations receivable for departmental).

    Appropriation note – quarantined amounts are included as legally available appropriation with a footnote disclosing the rationale and amount (current year) and additional disclosure by appropriation Act (prior year).

    For information on the quarantining process, email Annual.Appropriations@finance.gov.au.

    Reappropriation of operating or departmental capital budget

    Under paragraph 8(c) of AASB Interpretation 1038, DCBs are designated as contributions by owners (that is, equity).

    Paragraph 12 of AASB Interpretation 1038 expressly prohibits NCEs from reclassifying appropriations between operating and equity or vice versa. Instead:

    • NCEs must seek approval, typically from the Finance Minister, to enable the amount to be reappropriated at Additional Estimates
    • the original amount appropriated is to be withheld through a PGPA Act section 51 direction, until such a time as the relevant appropriation Act automatically lapses.

    Accounting treatment for departmental operating reappropriated as equity:

    Accounting treatment for:

    • original amount appropriated as departmental operating (Appropriation Act No. 1) – an increase in appropriation revenue and appropriations receivable.
    • approval (typically Finance Minister) and reappropriation of equity (Appropriation Act No. 3) – an increase in contributed equity and appropriations receivable.
    • original amount withheld by PGPA Act section 51 direction – for accounting treatment and impact on appropriation note, see 7. Departmental appropriation withheld.

    Appropriation note – the original amount and reappropriated amount are both included as legally available appropriation, despite the original amount being subject to a PGPA Act section 51 withholding.

    See illustrative example D4.5 in Appendix 1, available under Tools and Templates, for more information.

    Lapsing appropriations

    FRR section 39 - Equity returns and adjustments

    This section defines and sets out the treatment of departmental equity returns.

    Annual appropriation Acts contain an automatic repeal date – often 1 July, 3 years after the amounts were first appropriated.

    Lapsing appropriations are accounted for as departmental equity returns in accordance with subsection 39(1) of the FRR.

    Accounting treatment for lapsing appropriations:

    The following treatment assumes a 1 July repeal date:

    • accounting treatment – appropriations receivable is reduced against contributed equity on 30 June
    • appropriation note – lapsing amounts included as legally available appropriation (as they are still legally available as at 30 June), with a footnote to disclose that the amounts will lapse on 1 July.

    See illustrative example D5 in Appendix 1, available under Tools and Templates, for further information.


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